December is a month of Advent – preparing, catching up, and waiting. There has been a lot of economic and political news lately, most of it not incredibly bad. Some has even been good. Let’s celebrate the season and the thin coating of snow on the ground by catching up with the unfolding stories.
The jobs picture does continue to improve, with an official 120k jobs added in November alone. This is not a huge gain over October but it shows that the momentum is continuing, as noted before. This came despite a stubbornly high Unemployment Initial Claims number, which has not fallen much below 400k per week. Big companies and government appear to be shedding jobs, but others are being created. Where are these new jobs? No one has been specific about the growing areas of the economy, which probably means that it is not obvious and no one knows yet.
The high rate of churn is a strong sign that restructuring is occurring and the next economy is finally being formed around us. When that is identified there will be a lot more investment in whatever is growing and a chance for real optimism to bloom. Give it about six months before it hits the popular press and really takes off.
Headline unemployment dropped even more, but this number is utterly useless. A lot of those gains were from “discouraged workers” falling off their official count because they’ve been out of work for over a year. As always, just ignore that number. What matters is this: the pace of job gains has to increase before a real dent is made in unemployment, but there is a foundation for future growth – as long as nothing screws it up.
The improving economy may have some relief for state and local governments built into it, too. The growth in jobs came despite layoffs of 20k in government, a figure that shows how pinched states have been. But Minnesota’s budget projection came in with a surprise $876M surplus, achieved by a combination of higher revenues, lower unemployment costs, and shuffling off some of the health care tab to the Feds. If state governments at least hold even for the next year and stop layoffs there will be more jobs yet. There is a feeling that we have indeed bottomed out.
At the Federal level, however, there is silence. The Super Committee failed to do anything at all, which was supposed to trigger automatic cuts to everything. Well, maybe. There was some talk of not going through this “sequestration” before everyone fell completely silent. No news is good news? Hardly. There is still a crisis, explained about as succinctly as I’ve ever seen by New Hampshire Democrat Mark Fernald (who ran for Governor in 2002). But Congress itself has decided to lay low, perhaps awaiting a big present from Santa.
That’s not to say that everyone at the top has been silently waiting. The Federal Reserve lowered its rate to a number of banks around the world, really targeting Europeans without making it too open. Nearly everyone can borrow from us at rates very close to zero, taking pressure off the European Central Bank (ECB) to lower its rates. There is even talk of another Quantitative Easing round for the first time since this summer, when the idea was roundly criticized in the financial world.
The International Monetary Fund also stepped up with more cash at the same time as the Fed action. The result is that Europe has, once again, bought itself some time and German Chancellor Angela Merkel will use that time to come up with a new structure that allows the ECB to do what it has to do without sticking taxpayers with the bag. That’s the plan, at least.
In Europe, the lack of an immediate crisis is close enough to good news, right?
Through it all, there is positive momentum. Much of what was necessary to achieve an economic restructuring is in place, although at the highest levels the politicians have an awful lot more dickering to do. Is the increased attention in Europe a sign that they will finally craft a solution to their problems? Is the decreased noise in the US a sign that Congress is about to get serious? We will see, with time. But the start of December has been pretty good so far.
What do you think? Are there some other big news stories that you’d like to talk about? Let’s make this something of an open thread and chat for a bit.